U.S. Court of Appeals for the Federal Circuit Chief Judge Sharon Prost. Diego M. Radzinschi

Bucking the U.S. government and the biotech and pharmaceutical industries, the U.S. Court of Appeals for the Federal Circuit on Monday narrowly construed the “on-sale bar” to patent validity despite new language in the America Invents Act.

A three-judge panel led by Chief Judge Sharon Prost reversed a New Jersey federal judge’s decision finding that Helsinn Healthcare SA did not avoid the on-sale bar even if it kept some details of a drug sale confidential.

“We conclude that, after the AIA, if the existence of the sale is public, the details of the invention need not be publicly disclosed” to trigger the statutory on-sale bar, she wrote.

The decision is a win for Winston & Strawn partner George Lombardi, who argued the appeal for Teva Pharmaceuticals USA. Teva wants to market a generic version of Helsinn’s Aloxi, a drug used to treat nausea and vomiting in chemotherapy patients. Helsinn, which was represented by Paul Hastings partner Joseph O’Malley Jr., has asserted four patents in an effort to block Teva’s entrance.

Before patenting Aloxi in the early 2000s, Helsinn struck a licensing and distribution deal with MGI Pharma Inc. for $11 million plus royalties. The deal covered 0.25 and 0.75 milligram doses of the drug, contingent on their approval by the U.S. Food and Drug Administration. The two companies announced the deal in a joint press release and a U.S. Securities and Exchange Commission filing, but details of the sales price and dosing were kept confidential.

Section 102(a) of the Patent Act blocks the patenting of inventions “in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” The idea is that once an invention is made available to the public, it can’t be withdrawn via the patent process.

The America Invents Act added the language “or otherwise available to the public.” Helsinn, the U.S. government, and the Biotechnology Innovation Organization (BIO) and Pharmaceutical Research and Manufacturers of America (PhRMA) trade associations argued that provision makes clear that a confidential sale like Helsinn’s is not “public” and therefore does not invalidate patents on the invention.

“Congress in the AIA eliminated any doubt that secret sales do not trigger the on-sale bar,” William Havemann wrote for the Justice Department and the U.S. Patent and Trademark Office in their amicus brief. “The plain text of Section 102(a)(1) makes clear that only sales or offers for sale that make an invention ‘available to the public’ trigger the on-sale bar.”

Prost disagreed, saying that interpretation would require the Federal Circuit to overrule several legal precedents — precedents the AIA never mentioned. And Helsinn’s sale was far from secret, she wrote. Rather, it “was publicly announced in MGI’s 8-K filing with the SEC. The 8-K filing also included a copy of the contract for sale as an attachment, albeit partially redacted.”

Requiring the disclosure of such confidential terms to trigger the law “would work a foundational change in the theory of the statutory on-sale bar,” she concluded.

Judges Timothy Dyk and Haldane Mayer concurred in Helsinn Healthcare v. Teva Pharmaceuticals USA.